United States Supreme Court

PHILLIPS v. COMMISSIONER OF INTERNAL REVENUE, (1931)

No. 455

Argued: April 23, 1931 Decided: May 25, 1931

The Attorney General and Mr. G. A. Youngquist, Asst. Atty. Gen., for respondent.

Mr. Justice BRANDEIS delivered the opinion of the Court.

In 1919, the Coombe Garment Company, a Pennsylvania corporation, distributed all of its assets among its stockholders, and then dissolved. Thereafter, the Commissioner of Internal Revenue made deficiency assessments against it for income and profits taxes for the years 1918 and 1919. A small part of these assessments was collected, leaving an unpaid balance of $9,306.36. I. L. Phillips, of New York City, had owned one- fourth of the company's stock and had received $17,139.61 as his distributive dividend. Pursuant to section 280(a) (1) of the Revenue Act of 1926, c. 27, 44 Stat. 9, 61, 26 USCA 1069(a)(1), the Commissioner sent due notice that he proposed to assess against, and collect from, Phillips the entre r emaining amount of the deficiencies. No notice of such deficiencies was sent
[283 U.S. 589, 592]
to any of the other transferees, and no suit or proceedings for collection was instituted against them. Upon petition by Phillips' executors for a redetermination, the Board of Tax Appeals held that the estate was liable for the full amount. 15 B. T. A. 1218. Its order was affirmed by the United States Circuit Court of Appeals for the Second Circuit. 42 F.(2d) 177. Because of conflict in the decisions of the lower courts1 a writ of certiorari was granted.
282
U.S. 828
, 51 S. Ct. 82, 75 L. Ed. -.

Stockholders who have received the assets of a dissolved corporation may confessedly be compelled, in an appropriate proceeding, to discharge unpaid corporate taxes. Compare Pierce v. United States,
255
U.S. 398
, 41 S. Ct. 365. Before the enactment of section 280(a)(1), such payment by the stockholders could be enforced only by bill in equity or action at law. 2 Section 280(a)(1) provides that the liability of the transferee for such taxes may be enforced in the same manner as that of any delinquent taxpayer.